Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Ranking Investment Proposals: Payback Period, Accounting Rate of Return, and Net Present Value Presented is information pertaining to the cash flows of three mutually exclusive

Ranking Investment Proposals: Payback Period, Accounting Rate of Return, and Net Present Value Presented is information pertaining to the cash flows of three mutually exclusive investment proposals:

Proposal X Proposal Y Proposal Z
Initial investment $98,000 $98,000 $98,000
Cash flow from operations
Year 1 90,000 49,000 98,000
Year 2 8,000 49,000
Year 3 49,000 49,000
Disinvestment 0 0 0
Life (years) 3 years 3 years 1 year

Select the best investment proposal using the payback period, the accounting rate of return on initial investment, and the net present value criteria. Assume that the organization's cost of capital is 10 percent.

Note: Follow rounding instructions noted for each computation. Use a negative sign with your answers, when appropriate.

Proposal X Proposal Y Proposal Z Best proposal
Payback period (years) Answer Answer Answer Answer
Accounting rate of return; Round answers to 4 decimal places. Answer Answer Answer Answer
Net present value; Round answers to nearest whole number. Answer Answer Answer Answer

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

How To Avoid IRS Audits

Authors: Victor S. Sy, CPA, MBA, Allana Santos, Roger Oriel, Louie Gajardo, Malou Aguilar Bledsoe, RJ Oriel, Mark Xavier Bautista, Kenno Samulde, Morton D Rosenthal Esq.

1st Edition

1530746477, 978-1530746477

More Books

Students also viewed these Accounting questions

Question

Use a three-step process to develop effective business messages.

Answered: 1 week ago